Senate's Statutory Language for Proposed Roth 401(k)

From H.R.1102
Comprehensive Retirement Security and Pension Reform Act of 2000 (Reported in the Senate)

SEC. 207. OPTION TO TREAT ELECTIVE DEFERRALS AS AFTER-TAX ROTH CONTRIBUTIONS.

(a) IN GENERAL- Subpart A of part I of subchapter D of chapter 1 (relating to deferred compensation, etc.) is amended by inserting after section 402 the following new section:

`SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFERRALS AS ROTH CONTRIBUTIONS.

`(a) GENERAL RULE- If an applicable retirement plan includes a qualified Roth contribution program--

`(1) any designated Roth contribution made by an employee pursuant to the program shall be treated as an elective deferral for purposes of this chapter, except that such contribution shall not be excludable from gross income, and

`(2) such plan (and any arrangement which is part of such plan) shall not be treated as failing to meet any requirement of this chapter solely by reason of including such program.

`(b) QUALIFIED ROTH CONTRIBUTION PROGRAM- For purposes of this section--

`(1) IN GENERAL- The term `qualified Roth contribution program' means a program under which an employee may elect to make designated Roth contributions in lieu of all or a portion of elective deferrals the employee is otherwise eligible to make under the applicable retirement plan.

`(2) SEPARATE ACCOUNTING REQUIRED- A program shall not be treated as a qualified Roth contribution program unless the applicable retirement plan--

`(A) establishes separate accounts (`designated Roth accounts') for the designated Roth contributions of each employee and any earnings properly allocable to the contributions, and

`(B) maintains separate recordkeeping with respect to each account.

`(c) DEFINITIONS AND RULES RELATING TO DESIGNATED ROTH CONTRIBUTIONS- For purposes of this section--

`(1) DESIGNATED ROTH CONTRIBUTION- The term `designated Roth contribution' means any elective deferral which--

`(A) is excludable from gross income of an employee without regard to this section, and

`(B) the employee designates (at such time and in such manner as the Secretary may prescribe) as not being so excludable.

`(2) DESIGNATION LIMITS- The amount of elective deferrals which an employee may designate under paragraph (1) shall not exceed the excess (if any) of--

`(A) the maximum amount of elective deferrals excludable from gross income of the employee for the taxable year (without regard to this section), over

`(B) the aggregate amount of elective deferrals of the employee for the taxable year which the employee does not designate under paragraph (1).

`(3) ROLLOVER CONTRIBUTIONS- 

`(A) IN GENERAL- A rollover contribution of any payment or distribution from a designated Roth account which is otherwise allowable under this chapter may be made only if the contribution is to--

`(i) another designated Roth account of the individual from whose account the payment or distribution was made, or

`(ii) a Roth IRA of such individual.

`(B) COORDINATION WITH LIMIT- Any rollover contribution to a designated Roth account under subparagraph (A) shall not be taken into account for purposes of paragraph (1).

`(d) DISTRIBUTION RULES- For purposes of this title--

`(1) EXCLUSION- Any qualified distribution from a designated Roth account shall not be includible in gross income.

`(2) QUALIFIED DISTRIBUTION- For purposes of this subsection--

`(A) IN GENERAL- The term `qualified distribution' has the meaning given such term by section 408A(d)(2)(A) (without regard to clause (iv) thereof).

`(B) DISTRIBUTIONS WITHIN NONEXCLUSION PERIOD- A payment or distribution from a designated Roth account shall not be treated as a qualified distribution if such payment or distribution is made within the 5-taxable-year period beginning with the earlier of--

`(i) the first taxable year for which the individual made a designated Roth contribution to any designated Roth account established for such individual under the same applicable retirement plan, or

`(ii) if a rollover contribution was made to such designated Roth account from a designated Roth account previously established for such individual under another applicable retirement plan, the first taxable year for which the individual made a designated Roth contribution to such previously established account.

`(C) DISTRIBUTIONS OF EXCESS DEFERRALS AND CONTRIBUTIONS AND EARNINGS THEREON-
The term `qualified distribution' shall not include any distribution of any excess deferral under section 402(g)(2) or any excess contribution under section 401(k)(8), and any income on the excess deferral or contribution.

`(3) AGGREGATION RULES- Section 72 shall be applied separately with respect to distributions and payments from a designated Roth account and other distributions and payments from the plan.

`(e) OTHER DEFINITIONS- For purposes of this section--

`(1) APPLICABLE RETIREMENT PLAN- The term `applicable retirement plan' means--

`(A) an employees' trust described in section 401(a) which is exempt from tax under section 501(a), and

`(B) a plan under which amounts are contributed by an individual's employer for an annuity contract described in section 403(b).

`(2) ELECTIVE DEFERRAL- The term `elective deferral' means any elective deferral described in subparagraph (A) or (C) of section 402(g)(3).'.

(b) EXCESS DEFERRALS- Section 402(g) (relating to limitation on exclusion for elective deferrals) is amended--

(1) by adding at the end of paragraph (1)(A) (as added by section 201(c)(1)) the following new sentence:
`The preceding sentence shall not apply to so much of such excess as does not exceed the designated Roth contributions of the individual for the taxable year.'; and

(2) by inserting `(or would be included but for the last sentence thereof)' after `paragraph (1)' in paragraph (2)(A).

(c) ROLLOVERS- Subparagraph (B) of section 402(c)(8) is amended by adding at the end the following:

`If any portion of an eligible rollover distribution is attributable to payments or distributions from a designated Roth account (as defined in section 402A), an eligible retirement plan with respect to such portion shall include only another designated Roth account and a Roth IRA.'.

(d) REPORTING REQUIREMENTS- 

(1) W-2 INFORMATION- Section 6051(a)(8) is amended by inserting `, including the amount of designated Roth contributions (as defined in section 402A)' before the comma at the end.

(2) INFORMATION- Section 6047 is amended by redesignating subsection (f) as subsection (g) and by inserting after subsection (e) the following new subsection:

`(f) DESIGNATED ROTH CONTRIBUTIONS- The Secretary shall require the plan administrator of each applicable retirement plan (as defined in section 402A) to make such returns and reports regarding designated Roth contributions (as defined in section 402A) to the Secretary, participants and beneficiaries of the plan, and such other persons as the Secretary may prescribe.'.

(e) CONFORMING AMENDMENTS- 

(1) Section 408A(e) is amended by adding after the first sentence the following new sentence: `Such term includes a rollover contribution described in section 402A(c)(3)(A).'.

(2) The table of sections for subpart A of part I of subchapter D of chapter 1 is amended by inserting after the item relating to section 402 the following new item:

`Sec. 402A. Optional treatment of elective deferrals as Roth contributions.'. 

(f) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2000.

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